Made a small entry in TVS Electronics Ltd around 43.50. i remember when i picked Gati/TCI and other logistic companies 2 years back focusing on coming demand from E-commerce sector when nobody was aware of it. It worked great and all of these turned multibaggers. stock market is all about seeing in the future; that too ahead of others.
Now I am focusing on outsourcing of warranty and after sales services sector. There are crores of Laptops and smart phones in india and number is rising fast. Companies need to invest big in setting dedicated Warranty services units. But they can save huge money by outsourcing these services to third party service providers like Logistics. So I feel this can be a big business in india.
I bought smartlink sometimes back around 50 on the same theme although it has a great name in networking solutions and other IT hardware products.It is now around 94/- and with one good quarter can touch 150 as it is having 113/- cash per share in its books as a result of sale of its Digilink brand few years back. It is investing big in setting up distribution channels for its IT and networking products under the brand names of Digisol, Digilite and Warranty service business under Digicare.
Now I find another one..TVS electronics Ltd which is a leader in Dot Matrix printers in india the demand for which is on a decline. So it has set its eye on retail sector and established a great brand in Point of sale devices like cash registers, Scanners, POS terminals, displays and POS systems etc with the brand name INDIPos. One can see these in all retail chains across india and demand of these will only rise with the growth in organized retail. Even small stores are investing in these due to huge savings in time and ease.
TVS-E has a great name in warranty services business in india and it is the authorized partner in india with Xiaomi. This is the business which along with retail POS products will change the fortune of this company.
It achieved turnover of 270 cr in 2014-15, however raw material costs are good at 102 cr which means it is manufacturing significant amount of products in its own units. Interest cost at 7 cr for a debt of around 57 cr is high but with proper planning this can be taken care of as it is working capital debt. Inventory, debtors all looks under control. Profit margins are not that great because of scale of operation and high interest costs which is eating away 90% of operating profits. But all these constraints represent prospects for high growth. I did not get much time for further study into its products and financials…will post second post on it with greater details.
I strongly feel that this sector will see huge growth. But invest with caution as it should be treated as risky although it is from the house of TVS. I always prefer risky stocks from good promoters like we did for NIIT. It is already trading near 50/- after we picked it up at 37/- as market is realizing the strength of its focus on changing its business model with more focus on corporate learning and skill development.
CMP is around 44/-
CMP is around 44/-
(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)